Financial planning for retirement and later life rarely includes the possibility of care home fees. Yet, even for people with modest assets who are receiving local authority funded care, fees can take a large chunk out of your estate. For couples it is particularly important to plan ahead and minimise your exposure.
The rules are quite complex and will change again in 2020 when the cap of £72,000 on care costs comes into force. Because local authorities are short of cash they are rigorously enforcing the rules that require people to fund some or all of their care.
Currently, anyone with assets of over approximately £23,000 will need to pay the entire cost of their care. The value of your home isn’t counted for care received in your own home but may be if you need to move into residential care. In most cases the fees are collected from the estate rather than being paid at the time.
This is where the wording in your Will becomes important. If one partner needs to go into residential care, it is possible to protect at least half of the estate from being used to pay the cost of care. However, you need to plan this while both partners are still alive. Once one partner has died there is very little you can do.
Giving away assets during your lifetime to avoid care home fees will almost certainly fail and can make life very complicated for the beneficiaries. Placing your home into a trust while you are alive so that it is effectively ‘owned’ by your children is also risky. If the council decides that you acted to deliberately avoid care home fees they will still try to recover them.
Passing half of the combined estate directly to your children on the death of the first partner also carries risks and complications, particularly for the surviving partner.
The safest option is to have a solicitor write appropriate trust arrangements into your Wills. This is the most effective way to minimise the amount of your assets that can be used to pay care bills and protect at least half of the estate for the surviving partner. And remember to review these arrangements periodically as the rules around fees and eligibility are likely to keep changing.
As ever, the further you plan ahead the better. If you don’t have a Will or if you haven’t considered the possibility of care fees you should talk to a qualified legal practitioner now to ensure that you have covered yourself for the future.